Custodia Bank scales back amid expectations of crypto policy shifts: report

Custodia Bank, a crypto-friendly Wyoming bank, said it plans to reduce its services as it prepares for policy reforms in the space.

Custodia Bank, a bank founded by Bitcoin advocate Caitlin Long, is scaling back its operations as it awaits expected policy changes that could create a more crypto-friendly regulatory environment, American Banker has learned.

The Cheyenne-based bank decided to reduce its operations to preserve capital “in anticipation of major crypto policy reforms,” ​​a decision made by the bank’s board of directors earlier this week, according to a Nov. 21 report. Citing Custodia’s statement, the report also states that the bank aims to maintain its patents and “clean compliance and operating record” for bank-issued stablecoins.

The decision follows workforce reductions earlier this year, when the bank laid off nine of its 36 employees to preserve resources. Custodia remains in a legal battle with the Federal Reserve over access to a master account that would provide direct access to Fed payment services. In March, a court ruled against Custodia’s request for such an accounting and denied review of the petition.

Fed’s rejection fuels Custodia’s legal fight

Custodia CEO Caitlin Long expressed gratitude to “our shareholders who help us continue our fight for the resilience of banking access for the law-abiding US crypto industry.”

In October 2020, Custodia Bank applied for a master account with the Kansas City Federal Reserve; This was a move that would allow the bank to offer the same services as institutions with direct access to the Fed’s payment systems. But three years later, the Federal Reserve rejected the application, citing the bank’s crypto-friendly stance and status as a state-chartered institution rather than a nationally chartered institution as factors complicating its eligibility.